Arian Neiron

The assets of Australian self-managed superannuation funds (SMSFs) surged in value to a record $557.1 billion in the June 2014 quarter, according to ATO data released last week, creating a huge opportunity for the local exchange traded funds (ETF) market to attract funds from this sector, according to Arian Neiron, Managing Director of Market Vectors Australia.

SMSF investment into listed shares increased to $177.6 billion in the June quarter, up from $174.8 billion in the March quarter accounting for around one third of all SMSF assets. Another $20.7 billion was invested in listed trusts (including ETFs) in the June quarter, up 2% from $20.3 billion in the March quarter.

SMSFs continue to amass record amounts into cash investments, which rose to a record $157.9 billion during the June 2014 quarter, up 1.7% from $155.3 billion in the March 2014 quarter. Those cash holdings represent 28% of all SMSF assets.

“SMSFs should consider investing greater amounts of their assets into ETFs, which are convenient, cost effective vehicles offering growth and diversification opportunities,” Mr Neiron said.

“Statistics show that SMSFs are increasing investment into listed trusts, such as ETFs, but there’s still a lot more work to be done.  ETF providers need to address the lack of awareness about the benefits of investing in ETFs to the SMSF sector, which is still largely sticking to the safety of cash.

“Many SMSF trustees are not aware how ETFs are creating new and easily accessible investment opportunities on the ASX. ETFs are ideal tools for SMSF trustees to build cost effective, diversified portfolios in asset classes such as international and Australian shares.  ETFs also offer flexibility to SMSF trustees,” Mr Neiron said.

Market Vectors recently launched an education microsite designed to provide a holistic overview ofinvesting in ETFs to help Australian advisers and investors better understand and navigate the ETF industry.

“We are fully committed to engaging with SMSF trustees and their advisers to help them better understand what comes with investing in ETFs. The ETF industry, like Self-Managed Superannuation, has come a long way and we hope both industries continue to grow. Education is a key part of that growth,” Mr Neiron said.

The post SMSF assets hit record $557bn – exposure to ETFs growing appeared first on AdviserVoice.

Arian Neiron

Market Vectors Australia, the exchange traded fund (ETF) business of Van Eck Global, has launched a holistic education initiative with the intention of communicating to advisers and their clients the benefits of ETFs, how they work and how to use them.

“While ETFs have been around for almost 15 years, there’s still a lot of work to be done to address the lack of awareness about investing in ETFs across the adviser, direct and self managed super fund segments,” said Arian Neiron, Managing Director, Market Vectors Australia.

“Most advisers and investors have heard of ETFs, but there are still a lot of questions being asked what the benefits of ETFs are and how to use ETFs in a portfolio.

“As issuers, one of the biggest challenges we face is ensuring investors fully understand the benefits that ETFs can bring to their portfolio and fully understand the difference between products they are investing in,” Mr Neiron said.

This week, to help address the education void Market Vectors has launched an all-encompassing education microsite designed to provide a holistic overview of investing in ETFs to help Australian advisers and investors better understand and navigate the ETF industry. This follows the ASIC launch of its National Financial Literacy Strategy last week.

Market Vectors’ education series highlights the many benefits of ETFs over other investment vehicles.

“The tax advantages of ETFs are often underplayed by the industry and not fully understood by advisers. One of the greatest benefits that advisers can provide to their clients is tax effective structuring of their clients’ portfolios. ETFs deliver better capital gains tax outcomes than unlisted managed funds for two reasons. The first, as they are passively managed, is their generally lower portfolio turnover. The second is that trading on the ASX allows for a more efficient and equitable allocation of capital gains when other investors redeem from the fund.”

Another focus area for Market Vectors’ education initiative is to help advisers and their clients understand the difference between indices that ETFs track.  Market Vectors’ education series looks at how an index is constructed, the types of ETF indices available in Australia and how they compare against each other.

“A lot of investors don’t look under the bonnet of the ETFs they are invested in. Understanding the index behind the ETF is one of the most fundamentally important aspects of passive investing,” Mr Neiron said. Market Vectors has launched a series of easy-to-follow education videos and ETF tips on its microsite. To also support the education initiative, Market Vectors has developed an “ETFs 101” presentation, enabling advisers to earn CPD points while they learn about ETF investing.

“We are fully committed to engaging with Australian advisers and investors to help them better understand what comes with investing in ETFs. The industry has come a long way since the first ETF listed on the ASX in 2001 and we hope the industry will continue to grow. Education is a key part of that growth,” Mr Neiron said.

The post ETF education needed: Market Vectors appeared first on AdviserVoice.

Arian Neiron

Investors are increasingly interested in equity income strategy exchange traded funds (ETFs) for two main reasons.

Firstly to capitalise on dividend income and secondly to get instant diversification benefits, according to Arian Neiron, Managing Director, Market Vectors Australia.

However, investors must ‘look under the bonnet’ of equity income strategy ETFs to understand the securities and performance of the underlying index.

The banks have typically been a key source of dividend income and franking credits for investors including self-managed superannuation funds (SMSFs).

“Australian investors have a huge appetite for bank shares because they represent an opportunity to earn yields in excess of cash while also reaping potential capital gains. There is a range of ETFs listed on the ASX which provide investors with access to dividend income with the majority exposed to the Australian banking sector. However, each ETF is structured differently,” Mr Neiron said.

“Investors need to do their homework and understand the underlying index that the ETF tracks. It is important to ask questions such as how much exposure does the index provide to Australian banks, what is the recent performance of the index and what is the ETF actually holding.”

Market Vectors Australian Banks ETF (MVB) is based on the purpose-built Market Vectors Australia Banks Index, which caps any one bank’s weighting at 20%. The index provides exposure to a minimum of six Australian banks offering more diversification across the sector. Currently, the index and MVB holds seven banks.

As a result of its purpose-built index, Market Vectors Australian Banks ETF has outperformed ASX-listed equity income ETFs over the calendar year-to-date (YTD) to 31 May2014[1].

“Market Vectors Australian Banks ETF returned 5.88% YTD to 31 May 2014. The best equity income strategy ETF returned 3.92% for the same period. From the beginning of January 2014 to 31 March, MVB returned a whopping 11.04% – well ahead of the ETFs employing equity income strategies.

“Many of the equity income strategy ETFs are highly exposed to the Australian banks, however MVB’s capping methodology at 20% provides more balanced diversification across the banking sector and also removes the large capitalisation biases that can be found in traditional market capitalisation weighted indices. This methodology has translated into higher overall performance,” Mr Neiron said.

“Investors know that with MVB they are investing in an ETF that is purely banks and therefore they will understand how the ETF’s performance will behave. It is essential that when investing in an ETF investors know what the underlying securities comprise. For example if the ETF regularly or substantially holds derivatives, it may not perform in line with expectations,” Mr Neiron said.

On the cost side, MVB is one of the most cost effective equity income ETFs listed on the ASX at 0.28%, making it a hugely attractive investment opportunity for advisers and SMSF investors.

“Given the level of exposure to Australian bank shares, we believe investors can utilise MVB for both equity income and capital growth in their portfolio without the risk of picking the wrong bank,” Mr Neiron said.

The post Looking under the bonnet of your Equity Income ETF appeared first on AdviserVoice.

Arian Neiron

Fresh data released this week shows Australian self-managed superannuation funds (SMSFs) have invested record amounts in cash investments despite low returns and the prospect of rising inflation. This may negatively impact their ability to grow or even protect their wealth, according to Arian Neiron, Managing Director of Market Vectors Australia.

SMSFs cash investments rose to a record $156.2 billion during the March 2014 quarter, a 1.6% increase from $153.7 billion in the December 2013 quarter. Those cash holdings represented 28% of all SMSF assets, which hit $558.6 billion in the March quarter, up 2% from $547.6 billion in December 2013, according to data released this week from the Australian Taxation Office (ATO).

The ATO data also reveals SMSFs had invested $179.5 billion in listed shares, a rise of 2.7% from $174.8 billion in the December quarter. Listed shares accounted for 32% of all SMSF assets in the March quarter.

“Given that inflation could head higher and cash rates could remain steady SMSFs are risking value erosion by being so heavily invested in cash”, Mr Neiron said.

“Annual inflation was 2.9% so the real returns on cash investments are close to zero, add in tax and you are in negative territory. The Reserve Bank has this week indicated that it is not likely to raise interest rates anytime soon and banks have lowered rates on term deposits. SMSF investors should consider their options to protect against rising inflation,” said Mr Neiron.

“One positive aspect of the data released by the ATO is that it reveals the quarterly growth rate in cash investments has slowed to 1.6% from 2.1% a year earlier, highlighting that SMSFs’ appetite for cash investments could be waning” he said.

The ATO data reveals SMSFs had invested $20.4 billion in listed trusts (including Exchange Trade Funds) during the March quarter, up 2.3% from $19.9 billion in the December quarter.

“SMSFs are adopting ETFs at a greater rate due to their instant diversification via a hassle free trade all with the benefit of liquidity and full transparency. Through diversification, ETFs may help SMSFs to reduce risk in their portfolios. They offer lower fees, full transparency of holdings and potential tax efficiencies, all of which are important to SMSF trustees,” said Mr Neiron.

The post SMSF’s reach record $558.6bn – still heavy cash appeared first on AdviserVoice.

Arian Neiron

According to the latest ASX Funds Monthly Update, Australia’s exchange traded funds (ETF) industry has surged to a record level in April 2014 to $11.13 billion, an almost 50% increase from 12 months ago.

Year-to-date, over $1 billion has flowed into ETFs quoted on the ASX, with April attracting record inflows of $331 million, an increase from $265 million in March.

Arian Neiron, managing director, Market Vectors Australia, said, “The increasing adoption of ETFs in model portfolios is contributing to the growth of Australia’s ETF industry. Other contributing factors include the ease with which they can be traded on the ASX and the range of investment opportunities available to Australian investors through ETFs.

“ETFs can give investors access to diversified portfolios of Australian and international equities with a range of different index methodologies, as well as currencies, commodities and even bonds,” he said.

The sector attracting the biggest flows in April was international equity-based ETFs attracting $120 million.

The best performing ETF in April was MSCI Singapore Index ETF delivering 7.42% followed by the Market Vectors Australian Property ETF (ASX Code: MVA), which delivered a total net performance for April of 5.88%.

Mr Neiron said Australia’s ETF industry is positioned for continued growth as a result of increasing innovation and as investors continue to adopt ETFs as a mainstream investment, particularly for cost, liquidity and tax benefits.

“The proliferation of ETF choices allows investors to develop tax-effective portfolios. For example, an investor wanting to target shares that pay fully franked dividends to receive franking credits can select an ETF specifically designed for this purpose to add to their portfolio. This can add significant value to investors’ after-tax returns,” said Mr Neiron.

“Another benefit of ETFs is that their holdings are published on a daily basis. ETF investors can access an indicative price called the ‘iNAV’ throughout the trading day similar to a share price. ETF investors therefore know exactly what assets the ETF holds and what their investment is worth at any point in time during the trading day. This transparency is an advantage of ETFs.

“In addition, ETFs generally offer higher liquidity in that investors can trade an ETF just like any other stock on the Australian share market throughout the trading day,” he said.

“A number of ETFs recently launched on the ASX to cater to investors’ evolving needs.  This can be seen in the expansion of real estate and global dividend ETFs, as well as the recent launch of first-of-its-kind ETF, the Market Vectors Australian Equal Weight ETF. We expect product diversification to continue in 2014 with a number of ETF providers set to launch new ETFs on the ASX, further expanding the investment universe for Australian investors,” Mr Neiron said.

The post Australia’s ETF industry reaches record assets of $11 billion appeared first on AdviserVoice.

Along with the surge in the Commonwealth Bank’s share price to a record high of $79.95 this week, Westpac reached a fresh high of $35.99, while ANZ broke through $35, reaching a high of $35.07 yesterday.

Partly explaining the surge in prices is the expectation of record profits in the first half reporting season, as well as anticipated higher dividends for shareholders. ANZ is expected to report its first-half profit on May 1, Westpac on May 5 and National Australia Bank on May 8.

The Commonwealth Bank has already reported its first-half profit, which surged 16 per cent to $4.27 billion, boosted by cost cutting and strong growth in mortgage lending, despite sluggish economic growth.

Russel Chesler, Director, Investments & Portfolio Strategy, Market Vectors Australia, says the big banks are attracting broad based investor support, with retail and institutional investors attracted by dividend growth as well as the big banks’ track record of delivering impressive capital gains.

“Three of the big banks are expected to unveil higher dividends in May and report strong, if not record, earnings for the first half, driven by continual cost cutting, strong growth in home lending and low levels of borrower default rates. This expectation is drawing investors to the sector, which has rallied in recent days ahead of the profit announcements,” Mr Chesler said.

“With dividend yields on banks around 5% compared to term deposits which are not yielding much more than 3%, many investors are choosing to invest in the banks. This search for yield outside of cash has seen bank share prices perform strongly this year and prices could continue to run given the powerful and entrenched market position the big banks hold in the Australian market,” Mr Chesler said.

“We’ve made it easy for people to invest in the bank sector by taking the stock selection decision making out of the investment process.  We offer investors the only exchange-traded fund (ETF) to gain pure, targeted exposure to Australian banks.  Market Vectors Australian Banks ETF which is available on the Australian Securities Exchange (ASX) under ASX code: MVB, is an efficient and cost effective way for investors to get exposure to Australia’s largest banks in a single trade.

“With a yield of 4.97% of the underlying portfolio, MVB tracks the Market Vectors Australia Banks Index, which currently provides diversified exposure to the seven largest and most liquid Australian banks.

“The Market Vectors Australia Banks Index caps any one bank’s weighting at 20 per cent to ensure no one bank dominates, removing the large capitalisation bias found in traditional market capitalisation weighted indices.  MVB is the only Banks ETF on the ASX,” Mr Chesler said.

The post CBA heads towards $80 as big banks hit record highs appeared first on AdviserVoice.

Arian Neiron

Market Vectors Australia, an exchange traded fund (ETF) business of US-based investment manager Van Eck Global, today announced that research proves an investment portfolio that follows an equal weight index produced stronger long-term returns and better diversification than traditional market-cap weighted indices. 

A white paper by Market Vectors Index Solutions, a German-based index provider, revealed that its Market Vectors Australia Equal Weight Index outperformed the S&P/ASX 200 Index in nine out of the last 12 years.

The research found that a hypothetical $10,000 invested in the Market Vectors Australia Equal Weight Index in January 2003 would have been worth $30,304 after ten years of investment. The same amount invested in the S&P/ASX 200 Index would have been worth $27,910 over the same period.

The white paper also cites a CSIRO-Monash Superannuation Research Cluster research paper published in 2013, which concluded that an equal weight index delivered the best performance over the long-term when compared to fundamental indices and market capitalisation indices in the US. The research found that $1 invested in an equal weight index in 1962 would have grown to $100.86 in 2009.  A $1 investment in a market-cap weighted index would have returned $59.04 for the same period.

Lars Hamich, Chief Executive Officer of Market Vectors Index Solutions, said, “Traditional indices were primarily designed as academic tools or economic indicators and not necessarily to underlie financial products.

“It is crucial that index methodology focuses on key features such as liquidity, diversification and pure-play exposure. These are important characteristics when it comes to the design of indices which are expected to underlie ETFs.

“The Market Vectors Australia Equal Weight Index is characterised by all of the above features. Moreover, its equal weight capping overcomes concentration issues because it removes the heavy bias to a few Australian large-capitalisation companies such as BHP and CBA,” said Mr Hamich.

Market Vectors Australia recently launched its Australian Equal Weight ETF (ASX code: MVW) – the first Australian equity equal weight ETF available to Australian investors. MVW tracks the Market Vectors Australia Equal Weight Index, which currently provides investors with equal exposure across 76 of the most liquid ASX-listed securities.

Arian Neiron, Managing Director, Market Vectors Australia said, “Australia has one of the most concentrated equity markets in the world with the top ten companies making up more than half of the market capitalisation of Australia’s top 200 listed stocks. The Market Vectors Australian Equal Weight ETF provides investors with diversified exposure to the Australian equity market and may form the core investment in a portfolio.

“We believe that MVW is an optimal portfolio construction tool.  It may be used as a starting point for a diversified portfolio.  Around an equal weight core, investors can take sector and stock positions to create an investment mix that reflects the investor’s own investment objectives and future expectations of the market,” he said.

The post Equal weight index outperforms traditional market cap weight index appeared first on AdviserVoice.

Australian SMSFs need to diversify away from cash: Market Vectors.

Australian self-managed superannuation funds (SMSFs) can take action to avoid poor real returns on cash investments, which represent nearly 30 per cent of all SMSF assets, according to Arian Neiron, Managing Director of Market Vectors Australia.

SMSFs invested $154.1 billion in cash and term deposits as at September 30, 2013. That represents 29% of all SMSF assets, which were valued at $531.5 billion in the September quarter of 2013, according to data from the Australian Taxation Office (ATO).

“SMSFs should consider diversifying their investments with ETFs in 2014 to build their wealth over time, rather than seeing the value of their cash eroded by tax and inflation,” Mr Neiron said.

“With interest rates falling to the lowest in years, and Australia’s inflation rate rising in recent times, the real returns on cash are falling. Australia’s inflation rate surprised the market in the final quarter of 2013, climbing to 2.7%, up from 2.2% in the December 2012 quarter. The sharp fall in the Australian dollar is expected to keep upward pressure on inflation through 2014,” he said.

“As well as term deposit investments, SMSFs have a wide range of listed investment options, such as ETFs, which can be used as a long term growth strategy or to gain short-to-medium term equity market exposure while deciding where to put funds longer term,” Mr Neiron said.

The ATO data also revealed SMSFs had invested $171.8 billion in listed shares, or 32.3% of all SMSF assets as at September 30, 2013.

“The Australian market is deeply concentrated with the top five securities accounting for almost 40% of the market. This concentration is also reflected in SMSF portfolios,” he said. “Historically, SMSFs have invested in only a small number of shares, favouring large-cap companies. The result is increased concentration risk through lack of diversification. This approach can lead to a risk profile that is actually higher than many trustees realise. An ETF can offer diversified exposure across a range of markets, companies and sectors, which SMSFs may overlook, but may reduce overall equity risk in their portfolios,” Mr Neiron said.

“For example, if a trustee of an SMSF wants to get exposure to the Australian banks, but doesn’t know which ones to choose, they could get a diversified exposure to all the banks by investing in the Market Vectors Australian Banks ETF (ASX code: MVB),” Mr Neiron said.

“If an SMSF wants exposure to property securities, rather than taking on high concentration risk by investing in one or two property trusts, they could invest in Market Vectors Australian Property ETF (ASX code: MVA), a purpose-built ETF offering a diversified exposure to a minimum of ten A-REIT securities, and caps any one security’s weighting at 10% to ensure no one security dominates.

“In addition, our Resources ETF (ASX code: MVR) and Emerging Resources ETF (ASX code: MVE) offer SMSFs the opportunity to invest in both large and small Australian resource companies offering excellent growth potential and exposure to mid and small-cap companies which are often ignored by SMSF investors given the huge focus on BHP Billiton and Rio Tinto. MVR and MVE provide SMSFs with direct exposure to a minimum of 20 Australian resources companies,” Mr Neiron said.

Market Vectors Australian sector ETFs are based on indices specifically developed by Market Vectors Index Solutions (MVIS), the index company of Van Eck Global, the tenth largest ETF issuer in the world, and the parent company of Market Vectors Australia.

“What sets our Australian sector ETFs apart is the rigorously designed methodology and rules governing the construction of the underlying indices. Each Australian sector ETF is based on a Market Vectors purpose-built pure play index, which seeks to provide better liquidity, tradability and diversification while reducing stock concentration issues that are typical of traditional sector indices on which many other ETFs are based,” Mr Neiron said.

The post SMSFs should consider risks of holding too much cash appeared first on AdviserVoice.

Arian Neiron

The performance in share markets this year has driven strong flows into exchange traded funds (ETFs), with over $1 billion pouring into ASX-listed international ETFs, helping to drive the market capitalisation of the ETF sector in Australia towards $10 billion.

Flows into ASX-listed ETFs with international exposure, including broad-based and sector exposure, passed $1.1 billion in the 10 months to the end of November. Attracting the lion’s share of flows were ASX-listed ETFs with exposure to US equities.

According to data released by the Australian Securities Exchange (ASX), from February to the end of November 2013, the percentage of international assets held by ASX-listed ETFs rose from just 21.6% to 32.4%. This represents a 50% increase in international holdings.

Arian Neiron, Managing Director, Market Vectors Australia, said, “The big story has been that Australian investors are pouring money into global equity based ETFs particularly US equities this year to take advantage of the soaring market there, which has outperformed the Australian share market on renewed investor sentiment.

“The overall strength of the Australian dollar, while diminished lately, has made international assets much more affordable than a decade or two ago,” said Mr Neiron.

According to Mr Neiron, along with increased flows into international ETFs, investors are also buying into strategy-based and fixed-interest ETFs.

“Australian strategy-based ETFs, including high-yield or high-dividend funds, have become more popular in 2013. According to the ASX, they accounted for 11.2% of ASX-listed ETF assets as at November 30, a rise from 9% in January 2013. Flows into this asset class over the year have been $361.2 million, almost equalling flows into Australian sector and broad-based ETFs,” he said.

“We’ve also seen cash and fixed-interest ETFs become more popular, representing 5.1% of ETF assets by November 30, up from 4% in January, reflecting the desire by investors to control risk by spreading their investments into more defensive asset classes.

“At the same time, some ETFs have become less popular, including commodity ETFs, which represented just 6.1% of ETF assets as at November 30, 2013, down from 13% of ETF assets in January, so there has been movement back into equity ETFs at the expense of commodities, in line with rising share markets,” Mr Neiron said.

Jonathan Morgan, Business Development Manager ASX commented, “Australia’s ETF market has grown rapidly this year, due to an expansion in product offering – including ETFs that address issues such as withholding tax and the paperwork usually associated with investing in international ETFs – and because of increased demand from self-directed and SMSF investors for low-cost and simple to implement investment solutions.

“The ETF market is on track to reach the market capitalisation milestone of $10bn funds under management,” Mr Morgan said.

Mr Neiron commented, “Market Vectors is developing a range of ASX-listed ETFs purpose-built for Australian investors to access new investment opportunities and diversify their portfolios into both local and international assets.”

The post Investors pour over $1bn into global assets via ASX-listed ETFs appeared first on AdviserVoice.